Correlation Between Hooker Furniture and Sea

Can any of the company-specific risk be diversified away by investing in both Hooker Furniture and Sea at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hooker Furniture and Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hooker Furniture and Sea, you can compare the effects of market volatilities on Hooker Furniture and Sea and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hooker Furniture with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hooker Furniture and Sea.

Diversification Opportunities for Hooker Furniture and Sea

-0.76

Correlation Coefficient

Hooker Furniture  Sea

Pay attention - limited upside

The 3 months correlation between Hooker and Sea is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hooker Furniture and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea and Hooker Furniture is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hooker Furniture are associated (or correlated) with Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Hooker Furniture i.e., Hooker Furniture and Sea go up and down completely randomly.

Pair Corralation between Hooker Furniture and Sea

Given the investment horizon of 90 days Hooker Furniture is expected to generate 7.68 times less return on investment than Sea. But when comparing it to its historical volatility, Hooker Furniture is 1.85 times less risky than Sea. It trades about 0.08 of its potential returns per unit of risk. Sea is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  5,638  in Sea on February 16, 2024 and sell it today you would earn a total of  1,226  from holding Sea or generate 21.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hooker Furniture  vs.  Sea

Hooker Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hooker Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sea

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hooker Furniture and Sea

The main advantage of trading using opposite Hooker Furniture and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hooker Furniture position performs unexpectedly, Sea can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sea will offset losses from the drop in Sea's long position.

The idea behind Hooker Furniture and Sea pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.